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Building Trust Through Transparency

There is much debate about how to measure the effectiveness — or strength — of a nonprofit organization. Some argue that measures like percentage of “overhead” or CEO compensation tell you everything you need to know about an organization. Others, including both of us, argue that organizational effectiveness cannot be reduced to crude financial measures — that to truly understand organizational effectiveness, you need to understand what the organization is trying to accomplish, what its track record of success has been, and what its plan for future impact is.

Anne Wallestad

At the heart of this debate is the critical question of trust. Donors are asking, “Can I trust this nonprofit to do what it says it is going to do?” “Will it use my resources wisely and effectively?” “Is it stable and sustainable enough that an investment in it is an investment in the future?”

These questions are both emotional and rational, and get to the core of the delicate and essential trust between donors and organizations. And while there are lots of mechanisms to help donors and organizations build that trust, we often overlook the very important role of the board of directors.

Boards — by definition — exist to preserve and protect the public’s trust. They have both a legal and an ethical responsibility to ensure that there is meaningful oversight of their organization’s operations and finances. They guarantee that the chief executive is held accountable to an independent body of individuals who protect and serve the organization’s mission and — by doing so —safeguard the public’s trust in the organization.

All too often, though, basic information about nonprofit boards is hidden from view. Left with no way to tell which organizations are following clearly established governance best practices, the public is left in the dark and organizations are subject to speculation and skepticism.

Jacob Harold

That is about to change. In a move that we believe will create a seismic shift in the public’s understanding of governance and board leadership, BoardSource and GuideStar are launching a new tool to help organizations share information with the public about its highest level of leadership: its board of directors.

Beginning today, organizations will have an opportunity to share information about their board’s practices as a part of their profile on the GuideStar Exchange. It now includes questions about board orientation and education, CEO oversight, ethics, board composition, and board performance — key elements of strong oversight and accountability. Soon, as a part of the ongoing evolution of GuideStar’s website, this information will be visible to the public in a new section of the GuideStar profile focused on “People and Governance,” creating transparency around what has all too often been hidden from the public’s view.

We hope that organizations will embrace this opportunity to share more information about how their boards are leading their organizations in thoughtful, intentional ways and help build trust with their donors and the public at large. And for those organizations that have not yet embraced the essential governance practices that are highlighted in the profile, we hope that the questions will serve as a catalyst for self-reflection and change within their boardrooms.

Ultimately, we hope that boards begin to be seen for what they truly are: an essential mechanism to ensure that nonprofit organizations are worthy of the public’s trust. And for those boards that might be asleep at the wheel, we hope that this will be a wake-up call — and an opportunity to fulfill the promise of good governance.

The preceding is a co-authored article by Anne Wallestad, president & CEO, BoardSource, and Jacob Harold, president & CEO, GuideStar. This is cross-posted on the BoardSource blog, Exceptional Boards, here. BoardSource is the recognized leader in nonprofit board leadership and supports, trains, and educates 90,000 nonprofit board leaders from across the country each year. GuideStar is the go-to resource for individuals searching for reliable information about nonprofit organizations, with more than 6 million users in the last year.